Purine-pyrimidine alternating sequences, such as (dC-dG)n.(dC-dG)n and (dT-dG)n.-(dC-dA)n, take a right-handed helical conformation, mostly B-DNA, or a left-handed helical conformation called Z-DNA, depending on the buffer conditions. We have previously found evidence for the abundant existence of such Z-DNA-forming sequences in the natural genome by hybridization and by direct DNA sequencing. Z-DNA formation by the (dT-dG)n.(dC-dA)n sequence was investigated by determining the sites which are sensitive to S1-nuclease in a plasmid containing the Pst 0.9 Kb fragment of the human cardiac actin gene (including the (dT-dG)25.(dC-dA)25 sequences. Plasmid DNAs of five different supercoilings were separately obtained by using a nicking-closing enzyme in combination with different amounts of ethidium bromide. Both single strand scission and double strand scission were induced by S1-nuclease in plasmids with superhelicity greater than 0.06, indicating that the sensitivity to S1-nuclease is supercoiling dependent. Both single and double strand incisions occurred at 3 to 5 bases from the end of the (dT-dG)25.-(dC-dA)25 sequence. These results indicate that S1-nuclease incises the DNA strand near the junction between the B- and Z- forms of DNA, 3-5 bases outside of Z-DNA sequences. In order to investigate the possible role of Z-DNA in the regulation of gene expression, the (dT-dG)n.(dC-dA)n sequence was inserted into a pSV2-CAT plasmid vector and a c-Ha-ras-1 clone. pSV2-CAT is a recombinant plasmid containing the chloramphenicol acetyltransferase (CAT) gene. Insertion of the Z-DNA sequence resulted in a significant enhancement of expression of the CAT gene and the transforming potentials of the c-Ha-ras-1 gene when they were transfected into mammalian cells.